Pound euro (GBP/EUR) wobbles despite sinking German morale
(Updated 15:00, 17/09/24) The pound euro (GBP/EUR) exchange rate is trading without a clear direction this afternoon despite news of weakened morale in the Eurozone’s largest economy.
A sharper-than-expected decline in Germany’s ZEW economic sentiment index revealed that economic morale in Europe’s powerhouse economy tumbled to its lowest level since October 2023, sliding from August’s seven-month low of 19.2 and falling short of consensus estimates of 17.
Marking the third consecutive monthly drop in economic sentiment, waning optimism in one of the bloc’s key economies serves to cast a shadow over the single currency this afternoon.
ZEW President Professor Achim Wambach, commented:
‘The hope for a swift improvement in the economic situation is visibly fading.
In the latest survey, we once again observe a noticeable decline in economic expectations for Germany. The number of optimists and pessimists is now evenly balanced.’
Looking to the pound (GBP), an ongoing lull in UK releases leaves GBP largely rangebound against its rivals as the European trading session nears its end.
Looking ahead, could signs of stubborn UK price pressures dampen Bank of England (BoE) interest rate cut bets, thereby boosting the pound?
At the time of writing, GBP/EUR is trading at €1.1869, virtually unchanged from this morning’s opening levels.
Original article continues below:
Pound euro (GBP/EUR) exchange rate fluctuates as markets await German data
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning ahead of the latest German ZEW economic sentiment indicator.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1847, virtually unchanged from this morning’s opening rate.
Euro (EUR) wavers prior to German ZEW index
The euro (EUR) is rangebound this morning ahead of the German ZEW economic sentiment index, due for release later this morning.
After rising modestly yesterday due to its negative correlation with a weakened US dollar (USD), EUR relinquishes its recent gains this morning as markets await news from the Eurozone’s largest economy.
Francesco Pesole, FX strategist at ING, said:
‘The German ZEW figures today will likely be poor again. The current situation index is expected to slip further to -80, and the expectation metric from 19 to 17.
But the euro’s strong momentum has gone through several concerning eurozone activity prints, and the ZEW should merely confirm the widely-priced notion that Germany’s outlook remains grim.’
Should the data reinforce concerns that Germany remains the ‘sick man of Europe’, the single currency will likely struggle to attract investor support.
Pound (GBP) muted amid lull in data
The pound (GBP) is largely subdued this morning amid a data-light UK calendar.
With UK inflation data and the Bank of England’s (BoE) latest interest rate decision due in the coming days, investors may remain reluctant to place any aggressive bets on Sterling in the meantime.
However, speculation that the BoE could deliver a less aggressive policy-easing cycle than that of other major central banks throughout the final quarter appears to keep the pound afloat amid a lack of market-moving releases today.
Michael Field, European Market Strategist at Morningstar, commented:
‘The chances of a further rate cut in September are slim, according to a recent poll of economists by Reuters, with almost all surveyed believing September is coming too soon after the recent rate cut.
Markets seem to be pricing in one more rate cut, which is likely to come later in the year.’
Elsewhere, Sterling could benefit from an improving market sentiment as the session progresses, due to its increasingly risk-sensitive status.
Pound euro exchange rate forecast: sinking German optimism to dent EUR?
Looking ahead, the latest German ZEW economic sentiment index is due to dip to 17.1 in September, falling from the previous month’s 19.2 and hitting a fresh seven-month low. Should the index print as forecast, further signs of waning German morale could weigh on the euro.
Elsewhere, global risk dynamics could impact the currency pairing. The pound may benefit from an improving market sentiment, while a move towards gloomy trading conditions could see the safe-haven euro take precedent.
However, ahead of the UK’s inflation release, due out on Wednesday, GBP exchange rates will likely remain subdued.